Indiana State Teachers’ Retirement FundSteve Overmyer (Member of the Fund) Trustee Ryan Kitchell (Office of Management & Budget) Trustee Gregory Hahn (Winthrop Capital Management)

Indiana State Teachers’ Retirement Fund

2007 Annual Report

The mission of the Indiana State Teachers’ Retirement Fund is to prudently manage the Fund in accordance with fiduciary standards,

provide quality benefits, and deliver a high level of service to its members, while demonstrating

responsibility to the citizens of the state.

Mitch DanielsGovernor

David J. Adams(Estate Ventures)

President

Don Bennett(Baker & Daniels

LLP)Vice President

Cari Whicker(Member of the

Fund)Secretary

Steve Overmyer(Member of the

Fund)Trustee

Ryan Kitchell(Office of

Management &Budget)Trustee

Gregory Hahn(Winthrop Capital

Management)Trustee

Steve RussoExecutive Director

Crystal M. LawsonDeputy Director of

Operations

Molly DeuberryDirector of

Communications& Outreach

Joy R. SmithDirector of

Administration

Julia PogueChief Financial

Officer

Tim WalshChief Investment

Officer

Rick WrightGeneral Counsel

Indiana State Teachers' Retirement Fund

Organization Chart

As of July 25, 2008

Keith HallInternal Auditor

Board of Trustees

150 West Market Street, Suite 300, Indianapolis, IN 46204-2809 Toll-Free: (888) 286-3544 Website: www.in.gov/trf


July 21, 2008 The Honorable Mitchell E. Daniels, Jr. Governor of Indiana, 204 Statehouse Indianapolis, Indiana 46204-2797 Dear Governor Daniels: We are pleased to submit the Indiana State Teachers’ Retirement Fund 2007 Annual Report. This report features a summary of fiscal years 2006 and 2007, highlighting changes in the Fund. Increase June 30, 2007 June 30, 2006 (Decrease) Number of Active Members 75,833 73,350 2,483 Number of Vested Inactive Members 5,021 5,303 (282) Number of Non-Vested Inactive Members 38,404 32,912 5,492 Number of Retirees and Beneficiaries 41,253 39,849 1,404 Annual Payout to Retirees and Beneficiaries 897.7 Million 780.7 Million 117 Million Net Assets held in trust for Pension Benefits 8,980.8 Million 7,791.4 Million 1,189.4 Million

Rate of Invested Earnings Distribution: Guaranteed Fund 5.50% 6.00% (0.50%) Bond Fund 7.35% 0.23% 7.12% Money Market (rollover accounts only) 5.34% 4.16% 1.18%

S&P 500 20.59% 8.59% 12.00% Small Cap 20.02% 10.12% 9.90%

International 30.69% 29.74% 0.95%

Unfunded Accrual Date Liability: Closed Plan Retired Lives 4,147.1 Million 3,620.8 Million 526.3 Million Active and Inactive Members 6,077.7 Million 5,904.4 Million 173.3 Million New Plan Retired Lives 148.6 Million 63.9 Million 84.7 Million Active and Inactive Members (34.1Million) 89.8 Million (123.9 Million) Total 10,339.3 Million 9,678.9 Million 660.4 Million Please Note: Annuity reserve accounts are fully funded and available to each member at the time of retirement or withdrawal. In the event of a member’s death, account balances are made payable to the designated beneficiary. The financial security of the Fund is most important to us. Over 160,000 members trust in our ability to manage their assets. Accordingly, we will continue to uphold the integrity of the Fund by demonstrating the highest level of fiduciary responsibility and providing quality service. Respectfully, Dave Adams, President Steve Russo Don Bennett, Vice President Executive Director Ryan Kitchell Steve Overmyer Cari Whicker, Secretary

http://www.in.gov/trf�

Table of ContentsFinancial Statements Auditor’s Report 1 Management’s Discussion & Analysis 2 Statement of Fiduciary Net Assets 6 Statement of Changes in Fiduciary Net Assets 7 Notes to Financial Statements 8 Required Supplemental Schedules 21 Investment Report Investment Manager Asset Allocation 22 Investment Manager Returns 25 Actual vs. Target Asset Allocation 28 Cumulative Performance Relative to Target 29 Total Fund Ranking 30 Actuarial Report Summary of Results 31 Assets and Liabilities 38 Calculated Contribution Rate 41 GASB Disclosures 42 Member Data 46 Payout Projections 47 Benefit Provisions 50 Assumptions and Methods 52 Financial Principles 59 Statistical Reports Schedule of Administrative Expenses 61 Schedule of Investment Expenses 62 Number of Approved Benefit Payments 63 Rate of Investment Earnings Distribution 63

Financial StatementsAuditor’s Report 1 Management’s Discussion & Analysis 2 Statement of Fiduciary Net Assets 6 Statement of Changes in Fiduciary Net Assets 7 Notes to Financial Statements 8 Required Supplemental Schedules 21

Investment ReportInvestment Manager Asset Allocation 22 Investment Manager Returns 25 Actual vs. Target Asset Allocation 28 Cumulative Performance Relative to Target 29 Total Fund Ranking 30

Callan Associates Inc.Investment Measurement Service

Quarterly Review

Indiana State Teachers’ Retirement FundJune 30, 2007

The following report was prepared by Callan Associates Inc. ("CAI") using information from sources thatinclude the following: fund trustee(s); fund custodian(s); investment manager(s); CAI computer software;CAI investment manager and fund sponsor database; third party data vendors; and other outside sourcesas directed by the client. CAI assumes no responsibility for the accuracy or completeness of theinformation provided, or methodologies employed, by any information providers external to CAI.Reasonable care has been taken to assure the accuracy of the CAI database and computer software. Inpreparing the following report, CAI has not reviewed the risks of individual security holdings or thecompliance/non-compliance of individual security holdings with investment policies and guidelines of afund sponsor, nor has it assumed any responsibility to do so. Copyright 2007 by Callan Associates Inc.

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Typewritten Text

22

Investment Manager Asset AllocationThe table below contrasts the distribution of assets across the Fund’s investment

managers as of June 30, 2007, with the distribution as of March 31, 2007.

Asset Distribution Across Investment Managers

June 30, 2007 March 31, 2007Market Value Percent Market Value Percent

Employer Assets $5,501,174,931 61.78% $5,254,901,326 61.12%

Domestic Large Cap Equity 1,705,867,509 19.16% 1,616,980,384 18.81%Domestic Mid Cap Equity 242,723,100 2.73% 230,399,711 2.68%Domestic Small Cap Equity 564,258,716 6.34% 527,930,522 6.14%International Equity 1,165,314,809 13.09% 1,077,160,449 12.53%Domestic Fixed-Income 1,144,567,439 12.85% 1,247,766,269 14.51%Absolute Return 230,883,568 2.59% 224,109,092 2.61%Alternative Investment 205,212,619 2.30% 173,123,339 2.01%Real Estate 242,347,171 2.72% 157,431,560 1.83%

Employee Assets $3,403,188,857 38.22% $3,342,326,135 38.88%

Domestic Large Cap Equity 708,659,317 7.96% 684,151,726 7.96%Domestic Small Cap Equity 399,478,926 4.49% 379,634,395 4.42%International Equity 224,810,574 2.52% 202,180,093 2.35%Domestic Fixed-Income 2,070,240,040 23.25% 2,076,359,921 24.15%

Total Fund $8,904,363,788 100.0% $8,597,227,461 100.0%

23Indiana State Teachers’ Retirement Fund

Investment Manager Asset AllocationThe table below contrasts the distribution of assets across the Fund’s investment

managers as of June 30, 2007, with the distribution as of June 30, 2006.

Asset Distribution Across Investment Managers

June 30, 2007 June 30, 2006Market Value Percent Market Value Percent

Domestic Equity $3,620,987,568 40.67% $3,051,293,283 39.44%

Large Cap Equity $2,414,526,826 27.12% $2,033,903,611 26.29%

Passive BGI (Equity Index) 814,127,545 9.14% 696,011,313 9.00% Rhumbline 471,702,028 5.30% 391,413,459 5.06% BGI (Russell 3000) - - 12,054 0.00%

Enhanced PIMCO 684,967,983 7.69% 564,745,344 7.30%

Growth INTECH 202,025,260 2.27% 124,878,714 1.61% H-S&Y - - 56,992,934 0.74%

Value Earnest 85,730,825 0.96% 72,465,800 0.94% ICAP 78,549,063 0.88% 64,282,648 0.83% Barrow Hanley 77,424,122 0.87% 63,101,345 0.82%

Mid Cap Equity $242,723,100 2.73% $214,307,233 2.77%

Core Franklin Associates 242,723,100 2.73% 214,307,233 2.77%

Small Cap Equity $963,737,642 10.82% $803,082,439 10.38%

Growth Aeltus Capital Management 250,774,222 2.82% 209,598,282 2.71% Wells 256,574,397 2.88% 204,458,739 2.64%

Value BGI R2000VL I 220,496,039 2.48% 189,503,881 2.45% Brandywine Capital Mgmt 235,892,984 2.65% 199,521,537 2.58%

International Equity $1,390,125,383 15.61% $1,068,471,789 13.81% Alliance Capital Mgmt 105,938 0.00% 60,686 0.00% Bank of Ireland - - 33,592 0.00% Alliance Bernstein 253,999,422 2.85% 195,051,328 2.52% Fisher 183,962,088 2.07% 146,278,345 1.89% Gryphon 238,361,748 2.68% 185,253,377 2.39% Manning & Napier 54,323,653 0.61% 40,189,500 0.52% State Street 659,372,534 7.41% 504,604,961 6.52%

Domestic Fixed-Income $3,214,807,479 36.10% $3,124,652,918 40.39% Alliance Capital Mgmt 1,436,063,482 16.13% 1,372,736,465 17.74% Reams Asset Management 1,444,261,505 16.22% 1,372,932,920 17.75% Taplin, Canida & Habacht 322,756,418 3.62% 304,192,193 3.93% Cash Flow Account 11,726,074 0.13% 74,791,340 0.97%

Absolute Return $230,883,568 2.59% $212,284,268 2.74% Bridgewater 109,580,767 1.23% 106,555,227 1.38% GMO 121,302,801 1.36% 105,729,041 1.37%

Real Estate $242,347,171 2.72% $152,535,687 1.97% TA Associates VII 31,139,578 0.35% 30,804,070 0.40% TA Associates VIII 7,500,000 0.08% - - RREEF 143,707,593 1.61% 121,731,617 1.57% RREEF Global 60,000,000 0.67% - -

Alternative Investment $205,212,619 2.30% $127,170,031 1.64% Portfolio Advisors 201,178,999 2.26% 127,170,031 1.64% Credit Suisse 4,033,620 0.05% - -

Total Fund $8,904,363,788 100.0% $7,736,407,976 100.0%


Investment Manager ReturnsThe table below details the rates of return for the Sponsor’s investment managers

over various time periods ended June 30, 2007. Negative returns are shown in red, positivereturns in black. Returns for one year or greater are annualized. The first set of returns foreach asset class represents the composite returns for all the fund’s accounts for that assetclass.

Returns for Periods Ended June 30, 2007

Market Last Last LastValue Ending Last Last 3 5 8-3/4

$(Dollars) Weight Quarter Year Years Years YearsDomestic Equity $3,620,987,568 40.67% 6.08% 19.76% 12.41% 11.65% 8.98%

Large Cap Equity $2,414,526,826 27.12% 6.06% 20.09% 11.81% 10.89% 6.49%

Passive $1,285,829,573 14.44% 6.26% 20.58% 12.02% 10.92% - BGI (Equity Index) 814,127,545 9.14% 6.27% 20.58% 11.69% 10.72% 6.25% Rhumbline Advisors 471,702,028 5.30% 6.24% 20.55% 11.70% 10.75% - Standard & Poor’s 500 - - 6.28% 20.59% 11.68% 10.71% 6.24%

Enhanced $684,967,983 7.69% 6.11% 21.44% 12.04% 11.41% - PIMCO 684,967,983 7.69% 6.11% 21.44% 12.04% 11.41% 6.18% Standard & Poor’s 500 - - 6.28% 20.59% 11.68% 10.71% 6.24%

Growth $202,025,260 2.27% 3.40% 11.63% 6.54% 8.04% - INTECH 202,025,260 2.27% 3.40% 12.50% 8.21% 11.26% - S&P 500 Growth - - 6.63% 19.37% 8.31% 8.57% 3.59%

Value $241,704,010 2.71% 7.12% 21.46% 14.89% 12.18% - Earnest 85,730,825 0.96% 7.66% 18.80% 16.45% 14.83% - ICAP 78,549,063 0.88% 6.90% 22.83% 16.56% 12.50% - Barrow Hanley 77,424,122 0.87% 6.76% 23.16% - - - S&P 500 Value - - 5.95% 21.77% 15.09% 12.84% 8.57%

Mid Cap Equity $242,723,100 2.73% 5.40% 13.50% 13.91% 12.36% - Franklin Portfolio Assoc. 242,723,100 2.73% 5.40% 13.50% 13.91% 14.07% - S&P 400 Mid Cap - - 5.84% 18.51% 15.15% 14.17% 14.32%

Small Cap Equity $963,737,642 10.82% 6.31% 20.57% 14.16% 13.98% 15.64%

Growth $507,348,619 5.70% 8.88% 23.34% 14.43% 13.59% - Aeltus Capital Management 250,774,222 2.82% 7.99% 20.48% 13.78% 12.92% 9.59% Wells 256,574,397 2.88% 9.77% 26.29% - - - Russell 2000 Growth - - 6.69% 16.83% 11.76% 13.08% 7.64%

Value $456,389,023 5.13% 3.59% 17.64% 12.62% 13.35% - BGI R2000VL I 220,496,039 2.48% 2.36% 16.40% - - - Brandywine Asset Management 235,892,984 2.65% 4.76% 18.81% 14.74% 14.36% 14.85% Russell 2000 Value - - 2.30% 16.05% 15.02% 14.62% 14.19%

International Equity $1,390,125,383 15.61% 8.77% 30.82% 24.21% 17.40% 10.66% Alliance Capital Management 105,938 0.00% - - - - - Alliance Bernstein 253,999,422 2.85% 9.48% 32.97% - - - Fisher 183,962,088 2.07% 9.71% 26.52% - - - Gryphon 238,361,748 2.68% 8.26% 29.31% - - - Manning & Napier 54,323,653 0.61% 6.99% 36.02% - - - State Street 659,372,534 7.41% 8.58% 31.42% - - - International Benchmark* - - 8.42% 30.15% 23.84% 18.65% 10.47%

Alternative Investment $205,212,619 2.30% 9.58% 24.09% 23.19% 17.01% - Portfolio Advisors 201,178,999 2.26% 9.58% 24.09% 23.19% 17.01% - Credit Suisse 4,033,620 0.05% - - - - - Post Venture Cap Index - - 9.17% 20.69% 10.78% 16.61% 5.17%

Composite Fund $8,904,363,788 100.00% 4.15% 15.95% 10.91% 10.12% 7.67%

*International Benchmark is MSCI EAFE through June 30, 2005 and MSCI ACWI ex US thereafter. 25Indiana State Teachers’ Retirement Fund




Market Last Last LastValue Ending Last Last 2 3 4

$(Dollars) Weight Quarter Year Years Years YearsDomestic Fixed-Income $3,214,807,479 36.10% (0.28%) 7.19% 3.78% 4.79% 4.03%

Alliance Capital Mgmt. 1,436,063,482 16.13% 0.05% 6.89% 3.36% 4.45% 3.63% Reams Asset Management 1,444,261,505 16.22% (0.66%) 7.49% 3.85% 4.97% 4.28% Taplin, Canida & Habacht 322,756,418 3.62% (0.28%) 6.05% 3.55% 4.15% 3.97% Lehman Brothers Agg. - - (0.52%) 6.12% 2.60% 3.98% 3.05%

Absolute Return $230,883,568 2.59% 2.90% 8.83% - - - Bridgewater 109,580,767 1.23% 1.78% 2.82% - - - GMO 121,302,801 1.36% 3.94% 14.89% - - -

Real Estate $242,347,171 2.72% 13.57% 17.22% - - - TA Associates VII 31,139,578 0.35% 1.38% 13.92% - - - TA Associates VIII 7,500,000 0.08% - - - - - RREEF 143,707,593 1.61% 17.01% 18.05% - - - RREEF Global 60,000,000 0.67% - - - - -

Cash Flow Account 11,726,074 0.13% 1.32% 10.45% 10.53% 10.47% 9.27% Treasury Bills - - 1.28% 5.21% 4.59% 3.77% 3.07%

Composite Fund $8,904,363,788 100.00% 4.15% 15.95% 12.06% 10.91% 11.13%

Standard & Poor’s 500 - - 6.28% 20.59% 14.45% 11.68% 13.49%Domestic Equity Database - - 6.61% 19.85% 16.00% 13.86% 16.60%Domestic Fixed Database - - (0.11%) 6.62% 3.73% 4.68% 3.98%





Market Last Last Last Last LastValue Ending 5 7 10 12 15

$(Dollars) Weight Years Years Years Years YearsDomestic Fixed-Income $3,214,807,479 36.10% 5.61% 6.46% 6.38% 6.40% 6.71%

Alliance Capital Mgmt 1,436,063,482 16.13% 5.55% 6.60% 6.67% 6.67% 7.38%Reams Asset Mgmt 1,444,261,505 16.22% 5.63% 6.29% 6.63% 6.74% -Taplin, Canida & Habacht 322,756,418 3.62% 6.00% 6.78% 6.45% 6.46% - Lehman Brothers Aggregate - - 4.48% 6.01% 6.02% 6.11% 6.38%

Cash Flow Account 11,726,074 0.13% 7.93% 6.77% 6.23% 6.17% 5.80% Treasury Bills - - 2.76% 3.18% 3.80% 4.05% 4.04%

Composite Fund $8,904,363,788 100.00% 10.12% 6.85% 8.07% 7.82% 7.84%

Lehman Brothers Aggregate - - 4.48% 6.01% 6.02% 6.11% 6.38%Total Fixed-Income Database - - 5.35% 6.24% 6.13% 6.31% 6.61%Core Bond Fixed-Inc. Style - - 4.78% 6.17% 6.12% 6.23% 6.56%


Actual vs Target Asset AllocationThe top left chart shows the Fund’s asset allocation as of June 30, 2007. The top

right chart shows the Fund’s target asset allocation as outlined in the investment policystatement. The bottom chart ranks the fund’s asset allocation and the target allocationversus the CAI Public Fund Sponsor Database.

Actual Asset Allocation

Dom Large Cap Equity31%

Dom Mid Cap Eq.4%

Dom Sml Cap Eq.10%

International Equity21%

Domestic Fixed-Income21%

Absolute Return4%

Alternative Invst.4%

Real Estate4%

Target Asset Allocation

Dom Large Cap Equity25%

Dom Mid Cap Eq.4%

Dom Sml Cap Eq.7%

International Equity20%

Domestic Fixed-Income20%

Absolute Return7%

Alternative Invst.10%

Real Estate8%

$Millions Percent Percent Percent $MillionsAsset Class Actual Actual Target Difference DifferenceDom Large Cap Equity 1,706 31.0% 24.5% 6.5% 358Dom Mid Cap Eq. 243 4.4% 3.5% 0.9% 50Dom Sml Cap Eq. 564 10.3% 7.0% 3.3% 179International Equity 1,165 21.2% 20.0% 1.2% 65Domestic Fixed-Income 1,145 20.8% 20.0% 0.8% 44Absolute Return 231 4.2% 7.0% (2.8%) (154)Alternative Invst. 205 3.7% 10.0% (6.3%) (345)Real Estate 242 4.4% 8.0% (3.6%) (198)Total 5,501 100.0% 100.0%

Asset Class Weights vs CAI Public Fund Sponsor Database

Wei

ghts

0%

10%

20%

30%

40%

50%

60%

70%

Domestic Domestic Short Real International Intl AlternativeBroad Eq Fixed-Income Term-Cash Estate Equity Fixed-Inc

(39)

(85)

(69)(74)

(81)(46)

(37)(47)

(33)

(7)

10th Percentile 56.47 36.83 5.48 11.26 25.60 11.33 12.4225th Percentile 49.10 31.25 2.12 9.94 22.49 7.23 9.08

Median 42.95 24.46 0.76 7.43 19.42 4.63 6.0675th Percentile 37.43 19.69 0.20 4.86 16.00 1.96 4.0390th Percentile 29.64 16.27 0.06 3.65 12.21 1.09 1.76

Fund 45.68 20.81 - 4.41 21.18 - 7.93

Target 35.00 20.00 - 8.00 20.00 - 17.00

% Group Invested 96.49% 96.49% 46.90% 49.56% 92.92% 30.09% 44.25%

* Current Quarter Target = 24.5% S&P 500, 20.0% MSCI EAFE Index, 20.0% L/B Agg, 10.0% Dow Jones Wilshire 5000, 8.0% NCREIF Total Index, 7.0%Russell 2000, 7.0% 90 Day T-Bill + 5 % and 3.5% S&P Mid Cap 400.

28Indiana State Teachers’ Retirement Fund (Employer Assets)

Cumulative Performance Relative to TargetThe first chart below illustrates the cumulative performance of the Total Fund

relative to the cumulative performance of the Fund’s Target Asset Mix. The Target Mix isassumed to be rebalanced each quarter with no transaction costs. The difference betweenthe Total Fund return and the Target Mix return is explained by the performance attributionon the next page. The second chart below shows the return and the risk of the Total Fundand the Target Mix, contrasted with the returns and risks of the funds in the CAI PublicFund Sponsor Database.

Cumulative Returns Actual vs Target

Cum

ulat

ive

Ret

urns

(20%)

0%

20%

40%

60%

80%

100%

2002 2003 2004 2005 2006 2007

Total FundTotal Fund Target

Five Year Annualized Risk vs Return

0% 2% 4% 6% 8% 10% 12% 14%2%

4%

6%

8%

10%

12%

14%

16%

Total Fund Total Fund Target

Standard Deviation

Ret

urns

Triangles represent membership of the CAI Public Fund Sponsor Database



Total Fund RankingThe first two charts show the ranking of the Total Fund’s performance relative to

that of the CAI Public Fund Sponsor Database for periods ended June 30, 2007. The firstchart is a standard unadjusted ranking. In the second chart each fund in the database isadjusted to have the same historical asset allocation as that of the Total Fund.

CAI Public Fund Sponsor Database

Ret

urns

6%

8%

10%

12%

14%

16%

18%

20%

Last Year Last 2 Years Last 3 Years Last 5 Years

(29)(41)

(32)(47)

(43)(55)

(43)(49)

10th Percentile 18.80 15.76 14.49 13.0525th Percentile 18.31 15.02 13.54 12.32

Median 17.17 13.81 12.57 11.4975th Percentile 15.83 12.66 11.28 10.5590th Percentile 14.33 10.68 9.51 9.02

Total Fund 18.17 14.75 12.89 11.64

Policy Target 17.51 14.03 12.33 11.51

Asset Allocation Adjusted Ranking

Ret

urns

8%

10%

12%

14%

16%

18%

20%

22%

Last Year Last 2 Years Last 3 Years Last 5 Years

(28)(57)

(35)(76)

(38)(67)

(43)(53)

10th Percentile 19.41 15.79 13.84 12.8125th Percentile 18.22 15.07 13.19 12.00

Median 17.71 14.48 12.69 11.5875th Percentile 17.16 14.07 12.18 11.0490th Percentile 16.45 13.36 11.85 10.68

Total Fund 18.17 14.75 12.89 11.64

Policy Target 17.51 14.03 12.33 11.51



Actuarial ReportsSummary of Results 31 Assets and Liabilities 38 Calculated Contribution Rate 41 GASB Disclosures 42 Member Data 46 Payout Projections 47 Benefit Provisions 50 Assumptions and Methods 52 Financial Principles 59

Baltimore • Boston • Charlotte • Chicago • Cincinnati • Dallas • Detroit • Houston Indianapolis •Kansas City • Milwaukee • Minneapolis • Peoria • Philadelphia • Salt Lake City

June 10, 2008 The Board of Trustees Indiana State Teachers’ Retirement Fund Indianapolis, IN Dear Board Members: Submitted in this report are the results of the June 30, 2007 actuarial valuation of the Indiana State Teachers’ Retirement Fund. The member census data and the asset information for this valuation were furnished by your Chief Financial Officer and Staff. Their efforts and cooperation in furnishing these materials are acknowledged with appreciation. We did not audit the information provided, but we did review it thoroughly for reasonableness and compared it with the prior year’s submission for consistency. The actuarial assumptions were adopted by the Board pursuant to the Experience Study dated August 14, 2003 and covering the period July 1, 1996 to June 30, 2002. That study was conducted by the prior actuary at Gabriel Roeder Smith & Company. Assumptions are summarized in the Assumptions and Methods section of this report. Your attention is directed to the Comments on page 1 and the Summary of Key Valuation Results on page 2. The valuation was completed under the supervision of a Member of the American Academy of Actuaries with significant experience in valuing employee retirement systems, and was prepared using generally accepted actuarial principles and in accordance with standards of practice prescribed by the Actuarial Standards Board. To the best of our knowledge, this report is complete and accurate and the actuarial methods and assumptions produce results that are reasonable. Respectfully submitted, John L. Dowell, FSA, EA, MAAA Michael Zurek, EA, MAAA JD/lmw

9320 Priority Way West Drive Indianapolis, Indiana 46240-1468 317-803-7777 888-290-1206 Fax: 317-803-7895 ABGIndiana.com

June 30, 2007 Valuation Summary of Results

Indiana State Teachers’ Retirement Fund Page 1

Comments Contribution Rates Page 10 shows the calculated contribution rate for the 1996 Account. That rate is determined as if the 1996 Account were a stand-alone plan. Since the Pre-1996 Account is funded on a pay-as-you-go-basis, only the expected benefit payments are shown on page 10. A similar normal cost plus UAL amortization contribution rate was calculated for the Pre-1996 Account and the two rates have been combined to determine the Annual Required Contribution disclosed on page 12. Plan Provisions The ad-hoc COLA effective January 1, 2007 pursuant to IC 5-10.2-5-41 was included in the census information provided to us. Any additional COLA, including the increase pursuant to IC 5-10.2-5-42, is estimated by an ongoing assumption of 1.5% annual increases in all pension payments. We are not aware of any other changes in the plan provisions since the June 30, 2006 actuarial valuation. Census Data Census data for the valuation was provided by ISTRF. We have thoroughly examined the data for reasonableness and consistency with prior years, but we did not otherwise audit it. Change in Assumptions ISTRF has granted retirees ad-hoc COLAs on a regular basis. In accordance with recent legislation, the ISTRF is required to account for future COLAs in reported liabilities. In the past, COLAs have averaged 1.5% per year. Whether or not COLAs will be paid at levels similar to the past depends on the financial situation of ISTRF each year. Beginning with the June 30, 2005 valuation, an assumption to account for future ad-hoc permanent COLAs was implemented pursuant to the requirements of the Indiana Code that states that the Board must consult with the actuary and the budget agency before determining the COLA assumption. The June 30, 2007 valuation reflects a future compound COLA assumption of 1.5%, as adopted by the Board. Several of the actuarial assumptions are based on a plan experience study completed by Gabriel Roeder Smith & Company. A similar study will be conducted in 2008. The results of that study will likely be reflected in the June 30, 2008 valuation assumptions. Investment Experience Investment experience for the year ended June 30, 2007 was excellent. The market value rate of return was 15.7%. Under the asset valuation method, market gains and losses are spread over a four-year period. The Market Value of Assets now exceeds the Funding Value by $504 million, providing significant cushion against potential future losses. Challenges The 1996 Account has been steadily funded since its inception. As membership in that portion of the plan increases, the amount of required contributions will increase as a dollar amount, but should remain relatively stable as a percentage of covered payroll with plan experience causing gradual changes. The primary funding challenge will be for the State to meet the projected pay-as-you-go obligations as shown on pages 24 to 25 for the Pre-1996 Account.

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Summary of Key Valuation Results 6/30/2007 6/30/2006 Pre-1996 1996 Account Account Total Member Information Number Active Members 36,526 39,307 75,833 73,350 Vested Inactive Members 3,861 1,160 5,021 5,303 Nonvested Inactive Members 12,714 25,690 38,404 32,912 Retired Members and Beneficiaries 39,328 1,925 41,253 39,849 Total 92,429 68,082 160,511 151,414 Active Payroll $ 2,376,389,845 $ 1,891,605,321 $ 4,267,995,166 $ 3,802,721,220 Annual Benefit Payments Annuity $ 81,398,004 $ 3,670,188 $ 85,068,192 $ 81,233,016 Pension 576,898,596 33,342,792 610,241,388 568,799,400 Total $ 658,296,600 $ 37,012,980 $ 695,309,580 $ 650,032,416 Assets and Liabilities Accrued Liability ASA Account Balance $ 2,840,180,829 $ 618,611,500 $ 3,458,792,329 $ 3,453,881,159 ASA Annuities 758,610,462 34,763,819 793,374,281 766,168,333 Pension 12,389,467,864 2,174,178,461 14,563,646,325 13,145,522,640 Total $ 15,988,259,155 $ 2,827,553,780 $ 18,815,812,935 $ 17,365,572,132 Market Value of Assets ASA Account Balance $ 3,016,052,518 $ 656,917,599 $ 3,672,970,117 $ 3,500,941,966 ASA Annuities 891,017,973 40,831,480 931,849,453 769,298,463 Pension 2,199,283,884 2,176,690,545 4,375,974,429 3,521,183,403 Total $ 6,106,354,375 $ 2,874,439,624 $ 8,980,793,999 $ 7,791,423,832 Funding Value of Assets ASA Account Balance $ 2,846,713,484 $ 620,034,358 $ 3,466,747,842 $ 3,453,881,159 ASA Annuities 840,990,952 38,538,959 879,529,911 758,957,302 Pension 2,075,803,074 2,054,478,259 4,130,281,333 3,473,850,504 Total $ 5,763,507,510 $ 2,713,051,576 $ 8,476,559,086 $ 7,686,688,965 Unfunded Accrued Liability ASA Account Balance $ (6,532,655) $ (1,422,858) $ (7,955,513) $ 0 ASA Annuities (82,380,490) (3,775,140) (86,155,630) 7,211,031 Pension 10,313,664,790 119,700,202 10,433,364,992 9,671,672,136 Total $ 10,224,751,645 $ 114,502,204 $ 10,339,253,849 $ 9,678,883,167 Funded Percentage ASA Account Balance 100.2% 100.2% 100.2% 100.0% ASA Annuities 110.9% 110.9% 110.9% 99.1% Pension 16.8% 94.4% 28.4% 26.4% Total 36.1% 95.9% 45.1% 44.3% Annual Costs Pension Normal Cost $ 171,479,555 $ 108,607,821 $ 280,087,376 Calculated Employer Contribution Rate - 1996 Account Only Fiscal 2009 Fiscal 2008 Normal Cost 5.74% 6.65% Amortization of Unfunded Liability 0.30% 0.49% Total 6.04% 7.14% Actual Employer Contribution Rate - 1996 Account Only 7.00% 7.25% Pre-1996 Account Only Fiscal 2009 Fiscal 2008 Pension Benefit Payments 686,400,000 645,000,000 Pension Contributions 688,000,000 651,000,000

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Unfunded Accrued Liability Pre-1996 Account $ millions Accrued Funding Value Unfunded Funded June 30 Liability of Assets Accrued Liability Percentage 1975 $ 1,570 $ 312 $ 1,258 19.9% 1980 2,843 539 2,304 19.0% 1985 4,023 1,073 2,950 26.7% 1991 7,182 2,161 5,021 30.1% 1992 7,949 2,376 5,573 29.9% 1993 8,508 2,592 5,916 30.5% 1994 9,087 2,809 6,278 30.9% 1995 9,675 2,984 6,691 30.8% 1996 10,283 3,242 7,041 31.5% 1997 10,868 3,678 7,190 33.8% 1998 11,481 4,130 7,351 36.0% 1999 12,173 4,731 7,442 38.9% 2000 12,409 5,210 7,199 42.0% 2001 12,696 5,363 7,333 42.2% 2002 13,498 5,555 7,943 41.2% 2003 13,355 5,728 7,627 42.9% 2004 13,549 5,765 7,784 42.5% 2005 14,254 5,797 8,457 40.7% 2006 15,003 5,478 9,525 36.5% 2007 15,988 5,764 10,224 36.1% 1996 Account $ millions Accrued Funding Value Unfunded Funded June 30 Liability of Assets Accrued Liability Percentage 1996 $ 48 $ 21 $ 27 43.8% 1997 176 72 104 40.9% 1998 298 136 162 45.6% 1999 498 240 258 48.2% 2000 706 368 338 52.1% 2001 828 447 381 54.0% 2002 1,167 621 546 53.2% 2003 1,392 826 566 59.3% 2004 1,649 1,039 610 63.0% 2005 2,011 1,268 743 63.1% 2006 2,363 2,209 154 93.5% 2007 2,828 2,713 115 95.9%

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Retired Members and Beneficiaries Receiving Benefits

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

45,000

1976

1978

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006

Num

ber

Pre-1996 Account 1996 Account Total

Total Retirement Allowances Being Paid

$0

$100

$200

$300

$400

$500

$600

$700

$800

1976

1978

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006

$Mill

ions

per

Yea

r

Pre-1996 Account 1996 Account Total

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Active Member Data Pre-1996 Account Valuation Average Payroll Pay June 30 Number ($000s) Age Service Pay Increase % 1975 63,932 $ 749,200 38.7 10.9 $ 11,719 1980 66,575 1,107,699 39.7 11.9 16,638 1985 62,932 1,519,887 41.5 14.2 24,151 1987 64,157 1,751,709 42.0 14.5 27,303 1989 65,986 2,044,797 42.6 14.9 30,988 1991 63,373 2,278,715 43.0 15.4 35,957 1992 63,980 2,416,263 43.8 16.0 37,766 5.0% 1993 64,594 2,536,165 44.0 16.1 39,263 4.0 1994 65,209 2,614,915 44.1 16.2 40,101 2.1 1995 66,542 2,728,811 44.2 16.2 41,009 2.3 1996 70,183 2,805,823 44.2 15.7 39,979 (2.5) 1997 63,520 2,739,436 45.4 16.9 43,127 7.9 1998 59,030 2,699,183 46.4 18.0 45,726 6.0 1999 56,560 2,755,489 47.4 19.3 48,718 6.5 2000 52,920 2,561,533 48.2 20.1 48,404 (0.6) 2001 50,802 2,564,451 48.7 20.7 50,479 4.3 2002 47,510 2,604,956 49.4 21.5 54,830 8.6 2003 43,705 2,448,271 49.6 21.7 56,018 2.2 2004 41,510 2,384,480 50.1 22.2 57,444 2.5 2005 39,097 2,305,726 50.6 22.7 58,974 2.7 2006 36,994 2,237,380 51.1 23.2 60,480 2.6 2007 36,526 2,376,390 52.1 23.8 65,060 7.6 1996 Account Valuation Average Payroll Pay June 30 Number ($000s) Age Service Pay Increase % 1996 8,683 $ 72,506 32.2 1.3 $ 8,350 1997 20,686 245,168 33.0 1.8 11,852 41.9% 1998 25,634 395,758 33.6 2.2 15,439 30.3 1999 21,185 538,837 35.3 4.0 25,435 64.7 2000 24,950 631,072 36.4 4.7 25,293 (0.6) 2001 24,846 754,426 36.3 5.5 30,364 20.0 2002 27,873 1,004,515 36.7 6.1 36,039 18.7 2003 29,936 1,136,864 37.0 6.5 37,976 5.4 2004 32,000 1,267,173 37.3 6.9 39,599 4.3 2005 34,826 1,428,604 37.5 7.2 41,021 3.6 2006 36,356 1,565,341 37.7 7.5 43,056 5.0 2007 39,307 1,891,605 38.2 7.8 48,124 11.8

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Active Members per Retired Life

1.0

1.5

2.0

2.5

3.0

3.5

4.0

1976

1978

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006

Ratio

Total Retirement Allowances as a Percent of Valuation Payroll

0.0%

2.5%

5.0%

7.5%

10.0%

12.5%

15.0%

17.5%

20.0%

1976

1978

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006

Perc

ent

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June 30, 2007 Valuation Assets and Liabilities


Reconciliation of Market Value of Assets

6/30/2006 6/30/2005 thru thru 6/30/2007 6/30/2006

Market Value, beginning of year $ 7,791,423,831 $ 7,179,715,874

Member Contributions 126,194,680 130,496,002

Employer Contributions 753,039,657 701,340,085

Benefit Payments (910,577,681) (789,275,978)

Transfers 3,803,697 3,608,120

Non-Investment Net Cash Flow $ (27,539,647) $ 46,168,229

Plan Expenses $ (6,521,555) $ (6,749,971)

Investment Return 1,223,431,370 572,289,699

Net Investment Return $ 1,216,909,815 $ 565,539,728

Market Value, end of year $ 8,980,793,999 $ 7,791,423,831

Market Value Net Rate of Return 15.7% 7.9%

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Development of the Funding Value of Assets

6/30/2006 thru 6/30/2007

1. Funding Value, beginning of year $ 7,686,688,965

2. Market Value, beginning of year 7,791,423,831

3. Market Value, end of year 8,980,793,999

4. Non-Investment Net Cash Flow (27,539,647)

5. Net Investment Return

a. Expected [.075 x ((2)+0.5(4))] 583,324,051

b. Actual [(3) - (2) - (4)] 1,216,909,815

6. Current Year Market Value Gain/(Loss) [(5b) - (5a)] $ 633,585,764

7. Deferred Recognition of Investment Gain/(Loss)

a. Fiscal 2007 (75% of (6)) $ 475,189,323

b. Fiscal 2006 (50%) 16,955,479

c. Fiscal 2005 (25%) 12,090,111

d. Total [(a) + (b) + (c)] $ 504,234,913

8. Preliminary Funding Value, end of year [(3) - (7d)] 8,476,559,086

a. 80% of Market Value, end of year [80% of (3)] 7,184,635,199

b. 120% of Market Value, end of year [120% of (3)] 10,776,952,799

9. Funding Value, end of year [(8), but not Greater

than 8(b), nor Less than (8a)] $ 8,476,559,086

10. Funding Value as a % of Market Value [(9) / (3)] 94.3854%

11. Net Investment Return on Funding Value [(9) - (1) - (4)] $ 817,409,768

12. Funding Value Net Rate of Return [(11) / ((1) + 0.5(4))] 10.7%

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Asset and Liability Allocation Market Value of Assets Allocation Pre-1996 Account 1996 Account Total Member

Active and Inactive $ 3,016,052,518 $ 656,917,599 $ 3,672,970,117

Retired 891,017,973 40,831,480 931,849,453

Total Member $ 3,907,070,491 $ 697,749,079 $ 4,604,819,570

Employer

Active and Inactive $ 0 $ 1,898,732,364 $ 1,898,732,364

Retired

Pension Stabilization Fund $ 1,880,110,945 $ 0 $ 1,880,110,945

Other 319,172,939 277,958,181 597,131,120

Total $ 2,199,283,884 $ 277,958,181 $ 2,477,242,065

Total Employer $ 2,199,283,884 $ 2,176,690,545 $ 4,375,974,429

Total $ 6,106,354,375 $ 2,874,439,624 $ 8,980,793,999 Unfunded Accrued Liability Allocation Pre-1996 Account 1996 Account Total Retired Members and Beneficiaries

Accrued Liability $ 7,063,889,376 $ 449,452,159 $ 7,513,341,535

Funding Value of Assets* 2,916,794,026 300,890,923 3,217,684,949

Unfunded Accrued Liability $ 4,147,095,350 $ 148,561,236 $ 4,295,656,586

Active and Inactive Members

Accrued Liability $ 8,924,369,779 $ 2,378,101,621 $ 11,302,471,400

Funding Value of Assets* 2,846,713,484 2,412,160,653 5,258,874,137

Unfunded Accrued Liability $ 6,077,656,295 $ (34,059,032) $ 6,043,597,263

Total

Accrued Liability $ 15,988,259,155 $ 2,827,553,780 $ 18,815,812,935

Funding Value of Assets* 5,763,507,510 2,713,051,576 8,476,559,086

Unfunded Accrued Liability $ 10,224,751,645 $ 114,502,204 $ 10,339,253,849

* Funding Value of Assets is 94.3854% of Market Value of Assets and is allocated between actives/retirees and Pre-96/Post-96 in same proportion as Market Value shown above.

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June 30, 2007 Valuation Calculated Contribution Rate


Calculated Employer Contribution Rate 1996 Account

Projected % of Employer

Projected Payroll Contribution for 6/30/2007 for Fiscal 2008 Fiscal 2009 Normal Cost $ 108,607,821 5.74%

Amortization of Unfunded Accrued Liability

Unfunded Accrued Liability $ 114,502,204

Amortization Factor (30-years, level % of pay) 20.5040

Amortization Payment $ 5,584,384 0.30%

Calculated Employer Contribution Rate $ 114,192,205 6.04% $ 119,000,000 • The dollar contribution, based on calculated rates, is a projection to the 2009 fiscal year at

the 4.5% payroll growth rate assumption and is provided for illustrative purposes. • The calculated contribution rate for the 1996 Account is determined as if it were a stand-

alone plan. Pre-1996 Account Expected Pension Benefit Payments $ 645,000,000 $ 686,400,000 • The Pre-1996 Account is funded on a pay-as-you-go basis. The figures shown above reflect

the expected pension payments to be made during fiscal year 2008 and fiscal year 2009. • Although not shown here, a Pre-1996 Account normal cost plus UAL amortization was

calculated and has been reflected on page 12.

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June 30, 2007 Valuation GASB Disclosures


GASB Statements No. 25 and No. 27 Required Supplementary Information Under the Governmental Accounting Standards Board (GASB) Statements No. 25 and No. 27, certain information about the plan is required to be disclosed. The information presented in the required supplementary schedules was determined as part of the actuarial valuations at the dates indicated. Additional information as of the latest actuarial valuation follows:

Valuation Date June 30, 2007

Actuarial Cost Method Entry Age Actuarial Cost Method

Amortization Method Level Percent of Pay

Amortization Period 30 Years

Asset Valuation Method 4-Year Smoothed Market Value with Corridor

Actuarial Assumptions:

Investment Rate of Return 7.50%

Projected Pay Increases 4.75% - 15.50% (includes 4.5% wage inflation)

Cost-of-Living Adjustments 1.5% Compounded Annually on Pension Portion

Membership in the plan consisted of the following at June 30, 2007, the date of the latest actuarial valuation: 2007

Retired Members and Beneficiaries Receiving Benefits 41,253

Terminated Plan Members Entitled to but Not Yet Receiving Benefits

Vested 5,021

Non-Vested 38,404

Active Plan Members 75,833

Total 160,511

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GASB Statements No. 25 and No. 27 Required Supplementary Information Schedule of Funding Progress

Valuation Date

June 30

Funding Value of Assets

(a)

Entry Age Accrued Liability

(b)

Unfunded Accrued Liability

(UAL) (b) - (a)

Funded Ratio

(a) / (b)

Covered Payroll

(c)

UAL as a % of

Covered Payroll

[(b) - (a)] / (c) 1996 $ 3,262,619,379 $ 10,330,788,316 $ 7,068,168,937 31.6% $ 2,878,329,486 245.6%

1997 3,750,138,439 11,044,660,156 7,294,521,717 34.0 2,984,603,913 244.4

1998 4,266,312,063 11,780,174,095 7,513,862,032 36.2 3,094,940,606 242.8

1999 4,970,720,334 12,670,924,443 7,700,204,109 39.2 3,294,326,130 233.7

2000 5,578,046,785 13,115,065,443 7,537,018,658 42.5 3,192,604,492 236.1

2001 5,810,759,564 13,523,825,973 7,713,066,409 43.0 3,318,877,027 232.4

2002 6,176,574,529 14,664,661,236 8,488,086,707 42.1 3,609,470,436 235.2

2003 6,554,364,927 14,747,339,056 8,192,974,129 44.4 3,585,134,913 228.5

2004 6,804,394,627 15,197,925,988 8,393,531,361 44.8 3,651,653,125 229.9

2005 7,065,299,476 16,264,893,444 9,199,593,968 43.4 3,734,329,113 246.4

2006 7,686,688,965 17,365,572,132 9,678,883,167 44.3 3,802,721,221 254.5

2007 8,476,559,086 18,815,812,935 10,339,253,849 45.1 4,267,995,166 242.3

Schedule of Employer Contributions

Fiscal Year

Ending

Valuation Date

June 30 Annual Required

Contribution Actual Employer

Contribution Percentage Contributed

1998 1996 $ 508,940,065 $ 465,350,488 91.4%

1999 1997 508,259,679 612,349,218 120.5

2000 1998 524,815,537 647,441,260 123.4

2001 1999 547,532,673 689,219,756 125.9

2002 2000 537,789,669 566,226,658 105.3

2003 2001 572,226,197 602,231,775 105.2

2004 2002 638,541,074 438,180,343 68.6

2005 2003 619,186,005 484,778,888 78.3

2006 2004 672,555,533 701,340,085 104.3

2007 2005 742,882,002 753,039,657 101.4

2008 2006 800,059,308

2009 2007 819,638,258

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GASB Statements No. 25 and No. 27 Statement of Plan Net Assets Assets Cash and Cash Equivalents $ 817,157,942 Securities Lending Collateral 1,448,920,710 Receivables Employer Contributions $ 29,246,347 Due from PERF 2,098,572 Member Contributions 38,053,905 Due from Lottery Commission 0 Securities Sold 619,425,900 Interest and Dividends 32,567,033 Total Receivables $ 721,391,757 Investments Equity Securities $ 4,340,551,773 Debt Securities 3,893,861,902 Other 480,962,951 Total Investments $ 8,715,376,626 Furniture and Equipment 9,560 Insurance Premium Paid in Advance 0 Total Assets $ 11,702,856,595 Liabilities Accrued Benefits Payable $ 0 Accrued Wages Payable 128,037 Accrued Liability for Compensated Absences - Current 71,011 Accounts Payable 5,566,770 Due to PERF 0 Securities Lending Collateral 1,448,920,710 Payables for Securities Purchased 1,267,315,577 Total Current Liabilities $ 2,722,002,105 Accrued Liability for Compensated Absences - Long-Term 60,491 Total Liabilities $ 2,722,062,596 Net Assets Held in Trust for Pension Benefits $ 8,980,793,999

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GASB Statements No. 25 and No. 27 Statement of Changes in Plan Net Assets 6/30/2006 thru 6/30/2007 Net Assets at Beginning of Year $ 7,791,423,831 Additions Contributions Member Contributions $ 126,194,680 Employer Contributions 723,039,657 Employer Contributions - Pension Stabilization 30,000,000 Total Contributions $ 879,234,337 Investments Net Appreciation (Depreciation) in Fair Value $ 945,150,422 Interest Income 200,435,363 Dividend Income 93,943,883 Securities Lending Income 77,859,483 Less Investment Expense Investment Fees (19,593,644) Securities Lending Fees (74,364,137) Net Investment Income $ 1,223,431,370 Other Additions Transfers from Other Retirement Funds $ 3,840,644 Annuity and Disability Refunds 0 Outdated Benefit Checks 0 Reimbursement of Administrative Expense 0 Total Other Additions $ 3,840,644 Total Additions $ 2,106,506,351 Deductions Annuity and Disability Benefits $ 897,676,227 Voluntary and Death Withdrawals 12,901,454 Claims on Outdated Benefit Checks 0 Administrative Expenses 6,044,784 Capital Projects 455,719 Depreciation Expenses 21,052 Transfer to Other Retirement Funds 36,947 Total Deductions $ 917,136,183 Change in Net Assets Held in Trust for Pension Benefits $ 1,189,370,168 Net Assets at End of Year $ 8,980,793,999

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June 30, 2007 Valuation Member Data


Member Data The tables below summarize the member data used in the valuation. The pages that follow show distributions of the member groups by age and service (for active and inactive vested members) and age and number of years retired (for retired members.) A retired member distribution of pension amounts by year of retirement is also included. Pre-1996 Account

Males Females Total

Number of Actives 9,674 26,852 36,526 - Average Age 52.8 51.8 52.1 - Average Service 26.0 23.0 23.8 - Average Pay $ 70,128 $ 63,235 $ 65,060

Number of Vested Inactives 900 2,961 3,861 - Average Age 55.7 55.5 55.6 - Average Service 17.7 16.2 16.5

Number of Nonvested Inactives 2,896 9,818 12,714

Number of Retirees and Beneficiaries 14,229 25,099 39,328 - Average Age 70.9 72.7 72.1 - Average Years Retired 11.4 13.1 12.5 - Average Monthly Annuity $ 203 $ 155 $ 173 - Average Monthly Pension $ 1,414 $ 1,114 $ 1,222

Total Number of Members 27,699 64,730 92,429 1996 Account

Males Females Total


Number of Vested Inactives 310 850 1,160 - Average Age 50.0 50.9 50.7 - Average Service 15.2 14.4 14.6


Number of Retirees and Beneficiaries 770 1,155 1,925 - Average Age 64.4 64.7 64.6 - Average Years Retired 5.3 5.2 5.2 - Average Monthly Annuity $ 185 $ 142 $ 159 - Average Monthly Pension $ 1,646 $ 1,308 $ 1,443

Total Number of Members 19,094 48,988 68,082 Total

Males Females Total


Number of Vested Inactives 1,210 3,811 5,021 - Average Age 54.3 54.5 54.5 - Average Service 17.0 15.8 16.1


Number of Retirees and Beneficiaries 14,999 26,254 41,253 - Average Age 70.6 72.4 71.7 - Average Years Retired 11.1 12.8 12.2 - Average Monthly Annuity $ 202 $ 155 $ 172 - Average Monthly Pension $ 1,426 $ 1,122 $ 1,233

Total Number of Members 46,793 113,718 160,511

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June 30, 2007 Valuation Payout Projections


Closed Group Actuarial Projections The schedules on the following pages for the Pre-1996 Account were produced by means of an actuarial projection. Whereas actuarial valuations provide a snapshot of the Retirement Fund as of a given date, actuarial projections provide a moving picture of Retirement Fund activities. The projected active and retired groups are developed from year to year by applying assumptions regarding pre-retirement withdrawal from service, retirements, deaths, and disabilities. Projected information regarding plan activity produces an expected future benefit payment stream. Projection results are useful in demonstrating changing relationships among key elements affecting system financial activity. For example, the relationship between annual benefits paid and assets will change over time. Projections are not predictions of specific future events and do not provide numeric precision in absolute terms. The future pension benefits shown in the table are estimates. Actual payments will likely differ from the amounts shown, however, understanding the relative growth is critical.

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Closed Group Projection: Pre-1996 Account $ in Millions

Active Members Inactive Members Year Ended

June 30 Number Payroll Number Pension Benefits Paid

2008 33,691 $ 2,322.1 44,979 $ 645.02009 31,040 2,258.7 46,669 686.42010 28,457 2,181.0 48,305 734.22011 25,957 2,091.8 49,845 786.12012 23,538 1,991.7 51,228 841.6

2013 21,233 1,884.4 52,447 898.32014 19,089 1,775.7 53,451 954.32015 17,087 1,664.6 54,261 1,009.72016 15,226 1,552.9 54,875 1,063.22017 13,488 1,440.3 55,309 1,114.8

2018 11,872 1,329.2 55,555 1,163.62019 10,443 1,223.6 55,540 1,208.62020 9,158 1,122.7 55,306 1,249.82021 8,006 1,027.1 54,870 1,287.12022 6,971 936.0 54,244 1,320.4

2023 6,049 849.9 53,447 1,349.32024 5,222 767.7 52,494 1,374.02025 4,476 688.2 51,403 1,394.72026 3,808 612.4 50,189 1,410.92027 3,206 539.1 48,855 1,423.1

2028 2,684 471.7 47,395 1,430.02029 2,232 410.2 45,822 1,431.62030 1,842 353.7 44,144 1,428.42031 1,511 303.5 42,386 1,419.52032 1,226 257.4 40,575 1,405.6

2033 987 216.9 38,730 1,385.92034 788 180.9 36,855 1,361.02035 621 149.2 34,950 1,331.42036 486 122.4 33,017 1,297.22037 376 99.2 31,076 1,259.0

Note: Projections are intended to demonstrate the pattern of future activities and should not be viewed

as a prediction of specific dollar amounts in any year.

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Closed Group Projection: Pre-1996 Account (Continued) $ in Millions

Active Members Inactive Members Year Ended

June 30 Number Payroll Number Pension Benefits Paid

2038 289 $ 79.9 29,137 $ 1,217.02039 220 63.8 27,214 1,171.82040 164 49.9 25,324 1,124.02041 121 38.7 23,474 1,074.02042 89 29.6 21,678 1,022.3

2043 66 23.0 19,945 969.42044 49 18.0 18,282 915.82045 36 13.9 16,700 862.22046 26 10.4 15,202 808.92047 18 7.6 13,790 756.3

2048 12 5.4 12,467 704.92049 8 3.6 11,232 654.72050 5 2.3 10,086 606.12051 3 1.4 9,026 559.32052 1 0.7 8,051 514.4

2053 1 0.3 7,157 471.62054 - 0.1 6,340 430.92055 - - 5,597 392.42056 - - 4,924 356.22057 - - 4,314 322.3

Note: Projections are intended to demonstrate the pattern of future activities and should not be viewed

as a prediction of specific dollar amounts in any year.

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June 30, 2007 Valuation Benefit Provisions


Summary of Benefit Provisions Regular Retirement Eligibility Age 65 with ten years service or age 60 with 15 or more

years of service or if age is at least 55 and the sum of age plus credited service is 85 or more.

Annual Amount State pension equal to total service times 1.1% of Average

Annual Compensation Early Retirement Eligibility Age 50 with 15 or more years of service Annual Amount State pension is computed as regular retirement benefit, but

reduced for each month between age at early retirement and attainment of age 65. The age reduction factor is calculated as the sum of the following:

• 1/10 of 1% for each month from age 60 to 65. • 5/12 of 1% for each month from age at early retirement

to 60 Deferred Retirement Eligibility Ten years of service. Benefit commences at regular or early

retirement eligibility. Annual Amount Computed as a regular retirement benefit with state pension

based on service and Average Annual Compensation at termination.

Disability Retirement Classroom Disability Benefit: Eligibility Five years of service. Annual Amount $125 per month plus $5 per month for each year of service

credit over five years. Alternative Disability Benefit: Eligibility Five years of service and determined to be disabled by the

Social Security Administration. Annual verification of Social Security disability is required.

Annual Amount Computed as a regular retirement benefit using creditable

service to the date of disability and without reduction for early retirement. The minimum benefit is $100 per month.

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June 30, 2007 Valuation Benefit Provisions


Summary of Benefit Provisions Death Before Retirement Eligibility 15 years of service. Spouse to whom member had been

married for two or more years is automatically eligible, or a dependent may be designated as beneficiary.

Annual Amount Computed as regular retirement benefit but reduced in

accordance with a 100% joint and survivor election Benefit Increases After Retirement No automatic increases after retirement are provided. Periodically, unscheduled increases have

been made. Average Annual Compensation Average of highest five years of compensation. Years do not need to be consecutive. Member Contributions All Fund members are required by state law to contribute 3% of salary contributions to their

Annuity Savings Account. These 3% contributions are generally “picked up” by the employer and contributed on a pre-tax basis on behalf of the employee. Extra voluntary contributions by the member are also possible, but on a post-tax basis. At retirement, there are six alternatives for receiving the proceeds of this account, including lump sums, full and partial rollovers, full and partial annuitization of the balance, and deferred distribution.

Forms of Benefit Payment (State Pension)

The normal form of benefit payment (Option A-1) is a single life annuity with a five-year certain period. There are five optional forms of payment available, as listed below. Additionally, members retiring between ages 50 and 62 may integrate their pension benefit with their Social Security benefit by choosing Social Security Integration (Option A-4) in conjunction with the normal form or any other optional form selected. Optional forms of payment are calculated on an actuarial equivalent basis.

Option A-2: Straight Life benefit with no certain period Option A-3: Modified Cash Refund Annuity (operates in conjunction with the Annuity Savings

Account). Option B-1: 100% Survivorship Option B-2: 66 2/3% Survivorship Option B-3: 50% Survivorship State law provides for actuarially-adjusted and re-calculated benefits based on a new optional

form election in the event of the death of the member’s spouse after retirement (IC 5-10.2-4-7). Optional forms of benefit are calculated based on 7.5% interest with a 40%/60% unisex blend of

the 1983 Group Annuity Male Mortality table set back three years and the 1983 Group Annuity Male Mortality table set back seven years.

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June 30, 2007 Valuation Assumptions and Methods


Summary of Actuarial Assumptions and Methods The assumptions used in this valuation reflect the study of experience covering the period July 1, 1996 through June 30, 2002. Investment Return Rate 7.5% per year, compounded annually (net after administrative

expenses). The 7.5% investment return rate translates to an assumed real rate of return of 3.0% over across-the-board salary increases and 3.5% over price inflation.

Pay Increase Assumption Sample increases are shown on page 32. The assumption for

each consists of a merit and/or seniority increase, 4.0% for price inflation, and 0.5% for real wage growth.

Total Active Member Payroll Assumed to increase 4.5% annually for purposes of calculating

the projected contribution for the 2009 fiscal year. Price Inflation 4.0% per year. Price inflation is not directly tied to benefits,

however, it is a component of the economic model used to determine total wage inflation.

Mortality Healthy 1983 Group Annuity Male Mortality Table set back five years for

males and seven years for females Disabled 1983 Group Annuity Male Mortality Table set forward five years

for males and three years for females. Retirement Sample probabilities are shown on page 30. Withdrawal Sample probabilities are shown on page 31. Disability Sample probabilities are shown on page 30. Actuarial Cost Method Entry Age Normal (level percent of pay) method. Asset Valuation Method The Funding Value of Assets recognizes investment gains and

losses in equal installments over four years. Marriage Assumption 100% of members are assumed to be married for purposes of

valuing death-in-service benefits. Male spouses are assumed to be three years older than female spouses.

Pay Increase Timing Beginning of (fiscal) year. Payroll amounts stated in the

valuation data are amounts projected to be paid during the current year.

Decrement Timing Decrements are assumed to occur at the beginning of the year. Other Disability and withdrawal decrements do not operate after

member reaches retirement eligibility. Only the withdrawal and death decrements operate during the first ten years of service.

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Summary of Actuarial Assumptions and Methods Miscellaneous Adjustments The calculated liabilities and normal costs were increased by 1%

to account for the inclusion of unused sick leave in the calculation of Average Compensation.

Actuarial Equivalence Basis for Optional Forms of Payment 7.5% interest with a 40%/60% unisex blend of the 1983 Group

Annuity Male Mortality table set back three years and the 1983 Group Annuity Male Mortality Table set back seven years.

Explicit Expense Load None COLA Assumption 1.5% compounded annually on pension portion. Employee Census and Asset Data Census and asset information was furnished as of the valuation

date by the Fund’s Administrative Staff. Although examined thoroughly for reasonableness and consistency with prior years, the data was not otherwise audited by the Actuary.

The actuarial valuation computations were made under the supervision of a Member of the American Academy of Actuaries (MAAA).

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Summary of Actuarial Assumptions and Methods Probabilities of Age and Service Retirement

Regular Retirement Rule of 85 Retirement Early Retirement

Age Male Female Age Male Female Age Male Female

50 0.0100 0.0100

55 0.1100 0.1100 55 0.0300 0.0300

60 0.1500 0.1500 60 0.1500 0.1500

65 0.3500 0.3500 65 0.3500 0.3500

70 1.0000 1.0000 70 1.0000 1.0000 Probabilities of Disability

Age Based Attained Age Male Female

25 0.0001 0.0001

30 0.0001 0.0001

35 0.0001 0.0001

40 0.0001 0.0001

45 0.0002 0.0002

50 0.0005 0.0005

55 0.0009 0.0009

60 0.0010 0.0010

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Summary of Actuarial Assumptions and Methods Probabilities of Withdrawal

Service Based Years of Service Male Female

0 0.3000 0.3500

1 0.1700 0.1800

2 0.1100 0.1400

3 0.0900 0.1100

4 0.0700 0.1000

5 0.0600 0.0800

6 0.0500 0.0650

7 0.0450 0.0600

8 0.0400 0.0550

9 0.0400 0.0500

Age Based Attained Age Male Female

25 0.0664 0.0950

30 0.0432 0.0720

35 0.0232 0.0430

40 0.0144 0.0260

45 0.0120 0.0200

50 0.0120 0.0200

55 0.0104 0.0180

60 0.0096 0.0140

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Summary of Actuarial Assumptions and Methods Pay Increase Assumption

Years of Service

Merit & Seniority

Base (Economic) Total

1 11.00% 4.50% 15.50%

5 5.00% 4.50% 9.50%

10 3.50% 4.50% 8.00%

15 2.50% 4.50% 7.00%

20 1.50% 4.50% 6.00%

25 0.25% 4.50% 4.75%

30 0.25% 4.50% 4.75%

35 0.25% 4.50% 4.75%

40 0.25% 4.50% 4.75%

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Definitions of Technical Terms Accrued Service Service credited under the system that was rendered before

the date of the actuarial valuation. Accrued Liability The difference between the actuarial present value of future

benefit payments and the actuarial present value of future normal costs. Also referred to as “actuarial accrued liability” or “past service liability”.

Actuarial Assumptions Estimates of expected future experience with respect to

rates of mortality, disability, turnover, retirement, rate or rates of investment return, and pay increases. Decrement assumptions (rates of mortality, disability, turnover, and retirement) are generally based on past experience, often modified for projected changes in conditions. Economic assumptions (pay increases and investment return) consist of the underlying rates in an inflation-free environment plus a provision for a long-term average rate of inflation.

Actuarial Cost Method A mathematical budgeting procedure for allocating the dollar

amount of the “actuarial present value of future benefit payments” between future normal costs and actuarial accrued liabilities. Sometimes referred to as the “actuarial funding method”.

Actuarial Equivalent One series of payments is said to be actuarially equivalent to

another series of payments if the two series have the same actuarial present value.

Actuarial Gain (Loss) The difference between actual unfunded actuarial accrued

liability and anticipated unfunded actuarial accrued liability — during the period between two valuation dates. It is a measurement of the difference between actual and expected experience.

Actuarial Present Value The single amount now that is equal to a payment or series

of payments in the future. It is determined by discounting future payments at predetermined rates of interest and by probabilities of payment.

Amortization Paying off a present value with periodic payments. Normal Cost The portion of the actuarial present value of future benefits

that is assigned to the current year by the actuarial cost method. Sometimes referred to as “current cost”.

Unfunded Accrued Liability The difference between the actuarial accrued liabilities and

the actuarial value of assets. Sometimes referred to as “unfunded past service liability” or “unfunded actuarial accrued liability” or simply as “unfunded liability”.

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The Actuarial Valuation Process The actuarial valuation is the mathematical process by which a contribution rate is determined. The flow of activity constituting the valuation may be summarized as follows: A. Covered Person Data: Furnished by the Plan Administrator Retired Members and Beneficiaries Now Receiving Benefits Former Employees with Vested Benefits Not Yet Payable Active Members B. + Asset Data (Cash and Investments): Furnished by the Plan Administrator C. + Estimates of Future Experience (Actuarial Assumptions): Established by the Board of

Trustees after Consulting with the Actuary D. + Funding Method: The Allocation of Employer Costs to Past Service, Current Service, and

Future Service E. + Mathematically Combining the Assumptions, the Funding Method, and the Data F. = Determination of: Plan Funded Status and Employer Contribution Rate

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June 30, 2007 Valuation Financial Principles


Funding Objective The funding objective of the ISTRF 1996 Account is to establish and receive contributions that, when invested at the assumed rate of return, will ultimately accumulate assets over each member’s working lifetime that will be sufficient to pay expected retirement allowances. Fund Structure and Funding Arrangements The Indiana State Teachers’ Retirement Fund (ISTRF) is comprised of a two-account structure in compliance with Indiana Code Section 21-6.1-2-2:

• The Pre-1996 Account consists of those members who were hired prior to July 1, 1995, and who have maintained continuous employment with the same school corporation or covered institution since that date.

• The 1996 Account consists of those members who were:

a. hired on or after July 1, 1995 or b. hired before July 1, 1995 and prior to June 30, 2005, and subsequently served in a

position covered by ISTRF were either hired by another school corporation or institution covered by ISTRF, or were re-hired by a covered prior employer.

Characteristics of the Pre-1996 Account

1. Active membership in the Pre-1996 Account continues to decline as members quit, become disabled, die, retire, or incur a change in status as described in (b) above, thereby automatically transferring to membership in the 1996 Account.

2. The pension benefits from the Pre-1996 Account are funded by State appropriations (including

short-term contributions of some revenue from the State Lottery). Annuity benefits payable from the Pre-1996 Account are funded by the annuitization of Pre-1996 Account member contributions at the time of retirement.

Characteristics of the 1996 Account

1. As members depart from active service in the Pre-1996 Account, their replacements will become members of the 1996 Account. If the 1996 Account were a stand-alone plan, this pattern of departures and hirings would produce a fairly constant population size. However, overall active membership in the 1996 Account is expected to increase over time due to the following factors:

a. As Pre-1996 Account members depart from active service, their replacements will become

members of the 1996 Account; and b. The special provisions of Indiana Code Section 21-6.1-2-2 require that any member who

changed jobs within the System or who was re-hired within the System during the period July 1, 1995 - June 30, 2005 after a period of absence were moved to the 1996 Account..

2. Pension benefits payable from the 1996 Account are funded by contributions from local school

corporations or other institutions that employ covered members. Annuity benefits payable at retirement from the 1996 Account are funded by 1996 Account members.

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Statistical ReportsSchedule of Administrative Expenses 61 Schedule of Investment Expenses 62 Number of Approved Benefit Payments 63 Rate of Investment Earnings Distribution 63

SCHEDULE OF ADMINISTRATIVE EXPENSES

2007 2006 2005 2004 PERSONAL SERVICES TRUSTEES PER DIEMS $5,628.00 $6,164.00 $12,056.00 $9,856.00 STAFF SALARIES $2,101,470.57 $2,163,053.55 $2,152,409.83 $2,066,823.52 SOCIAL SECURITY $160,308.68 $156,332.49 $157,831.57 $154,544.37 RETIREMENT $226,645.28 $292,220.60 $232,928.80 $231,590.48 INSURANCE $369,900.91 $340,149.18 $361,592.69 $296,761.33 PERSONNEL RECLASSIFICATION/ADD'L STAFF $0.00 $0.00 $0.00 $0.00 TEMPORARY SERVICES $2,889.80 $11,010.00 $27,783.75

$21,179.93 TOTAL PERSONAL SERVICES $2,866,843.24 $2,968,929.82 $2,944,602.64

$2,780,755.63

PROFESSIONAL & TECHNICAL SERVICES ACTUARIAL $117,200.00 $109,600.00 $187,250.00 $119,450.00 DATA PROCESSING(MAINTAIN OLD SYSTEM)** $1,778,071.16 $1,751,349.25 $1,936,423.79 $699,395.75

ENHANCEMENTS TO DATA PROCESSING SYSTEM $455,718.60 $653,369.87 $0.00 $0.00

AUDIT $27,076.00 $28,750.00 $35,394.00 $35,502.00 BENCHMARKING $37,500.00 $30,000.00 $30,000.00 $25,000.00 PENSION DEATH RECORD COMPARISON $8,915.00 $13,664.50 $29,329.00 $21,144.00 MEDICAL EXAMINATIONS $700.00 $525.00 $1,362.50 $70.50 LEGAL SERVICES $46,173.21 $38,023.52 $79,336.31

$95,592.37 TOTAL PROF. & TECH. SERVICES $2,471,353.97 $2,625,282.14 $2,299,095.60

$996,154.62

COMMUNICATION PRINTING $349,850.99 $278,735.65 $315,800.75 $339,428.79 TELEPHONE $36,827.33 $75,695.22 $81,284.60 $59,390.54 POSTAGE $395,738.25 $373,127.62 $361,157.20 $422,583.79 TRAVEL $27,913.66 $22,615.86 $20,165.18

$21,012.21 TOTAL COMMUNICATION $810,330.23 $750,174.35 $778,407.73

$842,415.33

MISCELLANEOUS ADMINISTRATIVE LEGAL SERVICES $9,976.06 $13,257.19 $8,220.25 $10,591.32 EQUIPMENT RENTAL $18,586.25 $24,415.23 $17,074.10 $15,250.98 MEMBERSHIP & TRAINING $23,969.06 $23,225.98 $28,366.35 $77,883.92 OFFICE SUPPLIES $61,479.11 $85,481.29 $96,856.58 $40,748.00 MAINTENANCE $16,374.42 $9,517.40 $5,981.04 $19,345.45 BONDING $1,055.00 $2,128.00 $2,019.00 $2,019.00 OFFICE RENT $220,535.66 $223,348.60 $226,754.71

$216,750.75 TOTAL MISCELLANEOUS $351,975.56 $381,373.69 $385,272.03

$382,589.42

TOTAL ADMINISTRATIVE EXPENSES $6,500,503.00 $6,407,378.00 $6,725,760.00 $5,001,915.00

SCHEDULE OF INVESTMENT EXPENSES

2007 2006 2005 2004 NORTHERN TRUST $100,000.00 $100,000.00 $100,000.00 $100,000.00

TOTAL CUSTODIAL $100,000.00 $100,000.00 $100,000.00

$100,000.00

FIXED INCOME MANAGERS ALLIANCE CAPITAL MGMT. $1,004,735.09 $918,781.00 $886,752.00 $1,056,787.00 REAMS ASSET MGMT. $1,453,867.00 $1,298,940.00 $1,260,732.00 $1,492,271.00 TAPLIN, CANIDA, HABACHT $328,370.12 $300,599.99 $264,581.86 $176,142.08 EQUITY MANAGERS BARCLAYS $133,336.14 $107,807.34 $318,635.66 $134,859.65 RHUMBLINE $152,749.80 $145,470.76 $177,197.29 $181,095.71 PIMCO $1,452,631.01 $3,231.00 $747,896.00 $1,139,898.00 PORTFOLIO ADVISORS $620,000.00 $620,000.00 $545,000.00 $445,000.00 PUTNAM INVESTMENTS $0.00 $0.00 $0.00 $146,533.69 TA ASSOCIATES REALTY $0.00 $0.00 $52,677.00 $0.00 FRANKLIN PORTFOLIO ASSOC. $486,971.35 $462,838.78 $427,516.22 $354,021.85 VALENZUELA CAPITAL PARTNERS $0.00 $0.00 $0.00 $0.00 STATE STREET $2,204,419.63 $2,013,595.42 $0.00 $0.00 ARIEL $0.00 $933,506.60 $1,043,289.26 $1,000,707.92 BRANDYWINE $798,845.02 $984,516.67 $892,092.94 $833,587.02 AELTUS $1,191,884.47 $1,512,542.34 $1,267,098.65 $1,245,221.05 FISHER INVESTMENTS $974,408.10 $966,283.16 $0.00 $0.00 TCW $0.00 $0.00 $106,745.67 $690,026.29 EARNEST PARTNERS LLC $334,221.96 $302,276.10 $226,205.00 $140,808.00 MANNING & NAPIER $318,093.51 $256,014.06 $0.00 $0.00 GE ASSET MANAGEMENT $0.00 $0.00 $58,899.29 $169,873.00 INSTITUTIONAL CAPITAL CORP $385,084.00 $335,952.00 $260,519.00 $178,331.00 WELL CAPITAL MANAGEMENT $1,482,233.98 $975,795.79 $0.00 $0.00 PACIFIC FINANCIAL RESEARCH INC $267,242.00 $283,333.00 $316,474.00 $237,765.00 ENHANCED INVESTMENT TECH. INC $859,814.81 $612,579.00 $494,280.57 $238,659.70 HOLT-SMITH & YATES ADVISORS $77,605.00 $321,671.00 $296,019.00 $227,658.00 BRIDGEGWATER & ASSOCIATES $1,068,027.47 $1,446,221.25 $0.00 $0.00 DRESDNER RCM GLOBAL ADVISORS $0.00 $0.00 $69,577.00 $212,551.00 ALLIANCE $1,212,042.33 $1,076,917.33 $350,090.00 $305,807.00 GMO $378,894.58 $237,243.10 $0.00 $0.00 BANK OF IRELAND $0.00 $0.00 $994,545.55 $1,051,590.31 ALLIANCE BERNSTEIN INTERNATIONAL $0.00 $0.00 $76,661.35 $0.00 GRYPHON INTERNATIONAL INVESTMENT $1,083,864.56 $897,128.10 $76,558.84 $0.00

TOTAL MANAGEMENT $18,269,341.93 $17,013,243.79 $11,210,044.15

$11,659,194.27

CONSULTANT - CALLAN ASSOCIATES $458,596.93 $274,606.04 331,750.00 $232,312.50 INVESTMENT BENCHMARKING $18,500.00 $18,500.00 $18,500.00 $15,000.00 INVESTMENT ADMINISTRATIVE EXPENSES $501,971.66 $499,819.82 $303,777.41 $531,928.23 OTHER CHARGES $245,233.48 $703,054.35 $0.00 $0.00

TOTAL INVESTMENT EXPENSES $19,593,644.00 $18,609,224.00 $11,964,071.56 $12,538,435.00

NUMBER OF APPROVED BENEFIT PAYMENTS

FISCAL YEAR ENDING - JUNE 30 2007 2006 2005 2004 2003 Retirement (including disability/survivorship) 2,407 2,310 2,457 2,238 2,142 Regular Disability 1 0 0 1 3 Voluntary Withdrawal 3,240 1,623 1,633 1,499 1,474 Death Withdrawal 540 502 396 328 90

RATE OF INVESTMENT EARNINGS DISTRIBUTION

FISCAL YEAR ENDING - JUNE 30 2007 2006 2005 2004 2003 Guaranteed Fund 5.50% 6.00% 6.25% 7% 7% Bond Fund 7.35% 0.23% 7.16% 2.15% 13.85% Money Market* 5.34% 4.16% N/A N/A N/A S&P 500 Index Fund 20.59% 8.59% 6.35% 18.99% 0.31% Small Cap Equity Fund 20.02% 10.12% 10.07% 29.28% -1.33% International Fund 30.69% 29.74% 14.06% 29.58% -7.15% *Rollover accounts only


150 West Market Street, Suite 300 Indianapolis, Indiana 46204-2809 Telephone: (317) 232-3860 Toll-Free: (888) 286-3544 Fax: (317) 232-3882

Web site: www.in.gov/trf

Documents

Indiana State Teachers’ Retirement FundSteve Overmyer (Member of the Fund) Trustee Ryan Kitchell (Office of Management & Budget) Trustee Gregory Hahn (Winthrop Capital Management)